Virgin Australia encourages WA government to back regional tourism

Virgin Australia Fokker 100s at Perth Airport. (Rob Finlayson)

Virgin Australia says a bigger focus on promoting tourism to regional towns in Western Australia would put downwards pressure on airfares on intra-WA routes.

In a submission to the WA government’s inquiry into regional ticket prices, Virgin said demand on the bulk of its intra-WA services was mostly from the corporate and government travellers, particularly fly-in/fly-out workers on mining and resources projects.

And efforts to stimulate demand among leisure or non-business travellers had proved ineffective.

“We would highlight that most of the intrastate routes we serve in Western Australia do not deliver acceptable commercial returns to Virgin Australia at current pricing levels,” Virgin’s submission said.

“Without the demand from these corporate clients, it is highly probable that capacity and frequency on many intrastate routes would be lower, and it is also possible that airfares would be higher.

“Offering deeper discounts will be unlikely to boost demand and will simply reduce the total revenue we would otherwise earn on these services, reducing our ability to cover our costs of operation.”

Virgin and its regional subsidiary Virgin Australia Regional Airlines (VARA) serve nine WA destinations – Broome, Geraldton, Kalgoorlie, Karratha, Kununurra, Newman, Paraburdoo, Port Hedland and Newman – from Perth, as well as flights to Christmas and Cocos (Keeling) islands off the state’s north west coast. It also offers a once weekly return service between Port Hedland and Bali.

The airline said seat numbers on its intra-WA services had been cut by 24 per cent since 2014, amid the downturn in the mining and resources industry. Meanwhile, Virgin said average load factors on its regional WA network was below 60 per cent in 2016/17 and passenger numbers had fallen for the past two financial years.

“On the routes we serve, we generally seek to set airfares at levels that allow us, at a minimum, to recover our costs of operation. On regional routes with marginal levels of profitability, this can be difficult to achieve,” Virgin said.

Virgin noted Queensland had 21.2 million domestic visitors and 2.6 million international visitors in the 12 months to March 2017, compared with Western Australia which welcomed 9.5 million domestic and 950,000 international tourists in the same period.

It said more getting visitors to the state would help support intra-WA routes and it encouraged the state government to boost funding to Tourism Western Australia and explore directing a relatively higher proportion of marketing funds to promoting travel to regional WA.

“Increased demand for travel to Western Australia may also correspond with greater demand for travel on intrastate routes, potentially leading to an increased supply of services and the ability for airlines to realise greater cost efficiencies in these markets,” Virgin said.

“This may deliver lower airfares on such flights.”

Virgin said other impediments to offering lower airfares on regional routes included airport charges, which were “on average around double those levied by the regional ports” in New South Wales and Victoria on a cost per-passenger basis.

“Regional airport operators should critically examine whether current levels of airport charges are in fact meeting the expectations of communities,” Virgin said.

“Communities that are concerned about prices of air services may wish to see airport operators bring down the cost of airport charges in order to provide scope for airlines to offer lower airfares on regional routes.”

Qantas too in its submission to the WA Parliament’s Economics and Industry Standing Committee noted the high charges it faced at the eight regional airports it had regular public transport services to – Broome, Geraldton, Kalgoorlie, Karratha, Learmonth, Newman, Paraburdoo and Port Hedland.

“Based on a per passenger charge calculation, these airports are all in the top 15 most expensive airports in the Group’s domestic network, making Western Australia’s regional network the most expensive in Australia,” the Qantas submission said.

Qantas recommended “additional non-regulatory oversight on Western Australia’s regional airports to ensure local councils and privately-owned airport operators are pricing airports rationally”.

“By doing this, airports are discouraged from charging exorbitant airport charges in isolation and encouraged to operate airports more efficiently when considering the flow on impact of their unilateral decisions,“ it said.

The committee is expected to hand down its report in November.

Comments

  1. Nick says

    Funny how our government here just blames the airlines.
    So I don’t see this going to get any better

  2. Ben says

    A reduction in the airport charges component will do little to move the needle on fares at best it might reduce by $10/pax.

    I’ll also put even money on the airlines not moving their prices even if the airport charges did reduce. Just like they didn’t move until LONG after the fuel prices reduced.

    Although I recognise that newer machines come with increased leasing costs, one has to wonder if the prices would be any better if they operated E190’s or even newer machines like the E190-E2 or CS100. The fuel burn on a F100 has to be pretty hideous in modern terms. Even the B717 can’t be even in the same ball park as the CS100.

  3. Dave says

    what a load of rubbish. Virgin buys Skywest, hikes up the price of flights, pulls out of half the destinations. SkyWest offered reasonable fares for travel in WA, Virgin only cares about ports where it can charge a fortune for mining companies to fill their seats. REX has come in for a few ports which assists for Albany and Esperance.
    Is this an opportunity for AirNorth or Alliance to expand in WA? Or even a low cost brand to serve some tourist destinations like Broome or Learmonth (for Coral Bay).

  4. Alan Whitley says

    It’s a bit rich that Virgin’s submission puts the blame on the government for low traveler numbers and high ticket prices. I hope the WA Government takes a long hard look at Virgin’s efforts to promote these same destinations it feels the government is neglecting to support.

    As an example lets look at the Cocos Keeling Islands. This atoll half way between Australia and Sri Lanka is without doubt one of the most pristine destinations on the planet and epitomises the deserted tropical island. There are very few places in the world that have the natural and undeveloped beauty of the Cocos Islands, and they exemplify the notion of a tropical paradise. The islands should be attracting a far greater number of tourists to this location, as other destinations with this calibre of natural amenity experience.

    Its absurd that Virgin say this is the government’s problem when they make it near impossible to book a flight there. This is a structural issue within Virgin’s system that can be tested by going to your favourite flight booking website, putting in your departure city and then selecting Cocos Keeling Islands (CCK) and selecting some dates.

    Unlike almost every destination in the world, Virgin’s system configuration prevents you from making the connection to Perth and on to Cocos from most departure points.

    Where the connection is presented you then have the challenge of finding a seat available, despite almost none of the flights there being full.

    Try it yourself and you will see the absurdity of Virgin’s submission.

    This has been pointed out to Virgin before and they have chosen not to address the issue. This suggests that it is in Virgin’s best interest to minimise the number of passengers and maximise the amount they are reimbursed for each flight. A partially filled plane consumes less fuel and requires less cabin crew and maybe this is what is driving the economics for them.

    So no matter how well the tourism operators on Cocos or the WA government promote the destination, anyone interested in visiting the island will be thwarted by Virgin’s refusal to promote the destination and will simply give up and go elsewhere.

    I hope the WA government wakes up to this issue (and the Federal Government who foot the bill and subsidise Virgin’s flights) and take Virgin to task on this matter.

  5. Tony says

    Broome has great potential for tourist travel. It does get direct interstate routes in peak season using larger aircraft. Most traffic routes via Perth and generally the longer interstate fare to Perth is less than the short Perth Broome sector. The high fares arise from smaller, less fuel efficient aircraft. My suggestion is lower the frequency and use 737’s and A320’s. This may not suit FIFO workers but works better for tourism. PS love the F100 but it’s past it’s time.

  6. Marcus says

    Wish I could fly to Albany from the Eastern States, Adelaide- Albany so I can stop over there on my way to Perth. A bit of creativity wouldn’t go astray. Cruise ships call into Albany so there must be a market.

  7. David says

    Does anyone know if Qantas made a submission and what it contained? Maybe WA should look at allowing Qantas more access to that State.

  8. Jake says

    I wish Kalgoorlie would just lower its airfare charges, we have a population base large enough to have more flights, expecially into Melbourne and Adelaide. Airlines are trying to make it work, but there frequencies are terrible interstate